If each NEW customer is worth more money to you, you may be willing to spend more money to acquire customers.
That’s a no brainer, right? To find your new customers, you may be willing to spend more and send more. When you send out more mailers to even more in your target audience, you can use increased lifetime customer value to become a successful direct mail marketer.
Let’s drill into this deeper. Let’s say your customer lifetime value is $250 on average. If your direct mail campaigns cost you $150 to acquire each new customer and if your customer lifetime value is $250, then you are making $100 for each new customer you acquire. There’s nothing wrong with that return, it’s a GOOD return on your investment.
Let’s see if we can do even better.
When you have an acquisition cost of $150, you may be limiting yourself to a smaller mailing universe. Yet, with a lifetime value of $250, $150 may be all you can afford. Here’s where it gets interesting. If you INCREASE the lifetime value of your customer it’s natural that you could swallow spending more to acquire a new customer.
For example, let’s expect that you can increase your customer lifetime value to $400. Given this new number, you may be willing to spend as much as $200 to acquire a customer.
How will this impact mail campaigns?
It means a few things: Your response rates don’t have to be as high since you are willing to pay more for each customer; you are likely more willing to cast a wider net; and you may invest in a more elaborate package for your piece.
Let’s look at how the math adds up:
- You spend $200 to acquire a customer.
- Your Lifetime Value is $400.
- You end up making $200 off of each new customer double what you were making before!
Not only are you making more, but because you are mailing to more prospects, you are also bringing in MORE CUSTOMERS. This means your overall profits will skyrocket and you will have even more to invest in marketing your business!